Determining the best way to lease mineral rights in Pennsylvania can be a complicated process. There are many things to take into consideration when you are approached to lease mineral rights. Below, we will discuss some of the important things to consider when leasing mineral rights.
Receiving an offer to lease mineral rights:
If you have received an offer, it’s important to fully understand the key parts that make up the offer and how those affect you as a mineral owner in the Marcellus Shale. Here are the important things to focus on when considering an offer:
- Lease Bonus Amount: The lease bonus amount is the amount paid to the mineral owner for the right to drill on their property for a specified amount of time. This up front bonus payment is compensation for tying up the property and compensates the mineral owner in the event that the operator does not drill on the property during the specified amount of time.
- Royalty %: The royalty percentage is the amount of the production the mineral owner will receive after drilling is complete and the well starts producing. The higher the royalty percentage the better. Mineral owners should negotiate the highest royalty percentage they can while also trying to get the highest lease bonus possible.
- Lease Term: The typical mineral lease term in Pennsylvania is anywhere from 3 to 5 years. This gives an operator the right to drill on your property at any time during the lease terms. It’s in the mineral owners best interests to negotiate the shortest lease terms possible. A short mineral lease allows a mineral owner to lease the property again in the event that drilling does not occur during the lease term.
- Optional Extension: An optional extension is common practice in a number of leases but should be carefully considered by the mineral owner. If an optional extension exists, a new lease bonus payment and royalty % can be agreed upon for the lease extension. Mineral owners should attempt to either exclude an optional extension or negotiate a better lease bonus than the original lease amount. A property could be leased for a period of ten years if a 5 year lease is given and a 5 year optional extension so it’s important to negotiate the best terms possible if an extension is made because there opportunity to lease the property again will be a long ways away.
- Other Terms: The terms above are some of the key terms, but a mineral lease consists of a number of other factors. It’s important to have someone review your lease agreement to make sure the terms provided are favorable to you throughout the lease agreement. Contact us for a free consultation if you have been approached with a lease and we can help you through the terms of the offer.
Who is making the offer:
Another important factor to consider is who is making the offer to lease your mineral rights. There are a number of parties who may be interested in leasing your mineral rights from active investors to operators. It is important to know who is making the offer so you can determine whether that entity is capable of drilling on your property or if they are buying your property for investment purposes. Mineral owners should carefully consider their objectives when they lease. If an investor is leasing the property, they may be hoping to turn a profit by leasing mineral rights from you, and then leasing your mineral rights for more to an actual operator.
What to do after receiving an offer:
After you receive an offer to lease your mineral rights in Pennsylvania, it’s important to take your time and evaluate the offer. We offer a free consultation to mineral owners and we can help you evaluate the offer to determine if that offer meets your needs and objectives. It never hurts to get a second opinion and we are available to help you evaluate any offers you receive or answer questions about your property.
Free Consultation
If you own mineral rights and have questions, fill out the free consultation form below. We can help you with the following questions:
- Mineral Rights Value
- Evaluate whether you have a fair offer to sell mineral rights
- Answer questions about selling mineral rights
- Understanding Market Value of Mineral Rights
- + Any other questions related to mineral rights!
No matter what question you have regarding your mineral rights, we can help! We usually respond to your inquiry within 1 to 2 hours!
Whether you want to sell mineral rights, determine mineral rights value, or simply have some basic questions regarding your mineral rights ownership, fill out the form and we will quickly be in touch.
